Southdale surrounded: The mall is at the center of Edina boom – Minneapolis / St. Paul Business Journal

Southdale surrounded: The mall is at the center of Edina boom – Minneapolis / St. Paul Business Journal

April 27, 2018

When architect Victor Gruen designed Southdale Center in the 1950s, he envisioned that the first-of-its-kind indoor shopping center would become a town square surrounded by housing.

It took 60 years, but Gruen’s vision is finally coming true, and it’s at the forefront of a major Edina development boom that is turning the affluent suburb into a dense urban area.

Gruen, who died in 1978, “viewed Southdale and the mall as a failure because his initial vision included housing,” said Edina Economic Development Director Bill Neundorf. “It wasn’t until after he passed away that developers realized that there is a housing market and people do want to live by shops and they will live in mid-rise and high-rise buildings.”

There’s at least $300 million worth of major development projects under construction in Edina and another $600 million in the pipeline. If developers follow through on their plans, more than 900 housing units will be added within a block of Southdale in the next few years.

Crane Watch: Click here to see these projects on an interactive map.

The new development is largely replacing low-rise office and retail buildings with massive parking lots that were built between 1965 and 1974, said Neundorf, who has studied Southdale and Gruen’s vision.

“All of those properties are now 50 years old, and while some of them still do well, some of them have been antiquated, outdated and some of the office space has dipped down to a Class C type of space,” he said. “Those owners are realizing that this is the right time to demolish and redevelop their site, or do upgrades.”

Something similar is happening at the Pentagon Park campus southwest of Southdale. A longtime low-rise business campus is being demolished, and already two separate developers, Burnsville-based Chase Real Estate and Victoria-based Solomon Real Estate Group have pitched plans for a multifamily housing project and a medical office campus, respectively.

Real estate professionals point to a number of factors driving development in Edina. It’s an affluent city with high incomes, and it’s riding a broader hot multifamily market. But they also point to Southdale Center, which is reinventing itself after years of struggles.

Mall owner Simon Property Group is giving up big chunks of its parking lot for a new Homewood Suites hotel that is under construction, a Restoration Hardware furniture gallery and cafe that resembles a mansion, and a Shake Shack restaurant.

Most notably, however, is the teardown of former mall anchor J.C. Penney, where Chanhassen-based Life Time Inc. is building a prototype health club and co-working space.

“The Penney side of that mall had always been the dark side of the moon,” said Mike Sims, principal of Mid-America Real Estate. “It has always been the quiet side of the mall. The redevelopment with Life Time is a significant game-changer for Southdale. It’s going to bring traffic and a customer base that they had not seen previously.”

Sims has taken note of the changing landscape of Southdale and he’s moderating a panel discussion on the topic at the Minnesota Shopping Center Association monthly breakfast May 2, with Neundorf and representatives from Simon and Life Time.

Southdale’s resurgence comes after years of struggle as ownership changed hands several times while Mall of America, which is six miles east, siphoned customers.

The city in 2012 created a tax increment financing district to pay for improvements to the mall. It spent $4 million on sidewalks and continuously expanded the Promenade, biking and walking trails in the district. There’s also a Southdale Area Working Group that aims to create a small area plan, and Neundorf has been pining to get a bus rapid transit stop near Centennial Lakes.

“We definitely recognize that Southdale can’t survive just as an auto-centric area,” he said. “That was the vision in the 1950 — and that was what was built.”

Dean Williamson, president of of Bloomington-based Frauenshuh Inc., applauded the way the city and Simon have repositioned Southdale to keep up with changing retail trends. His firm is working with the city to build a 17-story apartment tower near 50th and Highway 100 at a former public works site.

“France Avenue has become another CBD [central business district]. You have downtown Minneapolis, downtown St. Paul, and France is becoming a CBD of its own.” he said. “It continues to be a vibrant area, which has led to a growth in housing.”

In mid-April, the Edina City Council approved a plan by developer Tom Lund and his partners for a 19-story luxury apartment tower to be built on the site of the former Guitar Center store just south of the mall. At 150 units per acre, it’ll be the most dense multifamily project in Edina history.

Lund has said that he and his partners are targeting downsizing Edina empty nesters who thus far have had to go to downtown Minneapolis for a condo or apartment.

Doran Cos. and KM2 Development are building a 185-unit luxury apartment building at 66th Street and York Avenue. CEO Kelly Doran said development pencils out in Edina because you can charge rents of $2.20 or $2.30 per square foot, which is about 10 percent below downtown Minneapolis rates.

How long that will last is yet to be determined, he said.

“In Edina, the question will be, how much is too much? Have we all gone crazy?” Doran said. “But so far, the product seems to be performing in what has been built.”

There’s at least $300 million worth of major development projects under construction in Edina and another $600 million in the pipeline. If developers follow through on their plans, more than 900 housing units will be added within a block of Southdale in the next few years.